I.

SHORT TITLE: BOY SCOUTS VS COA

II. FULL TITLE: BOY SCOUTS OF THE PHILIPPINES, Petitioner, vs. COMMISSION ON AUDIT,
Respondent. G.R. No. 177131, June 7, 2011, J. LEONARDO-DE CASTRO

III. TOPIC: Non-chartered GOCC

IV. STATEMENT OF THE FACTS

COA issued Resolution No. 99-0115 ("the COA Resolution"), with the subject "Defining the Commission’s
policy with respect to the audit of the Boy Scouts of the Philippines." In its whereas clauses, the COA
Resolution stated that the BSP was created as a public corporation under Commonwealth Act No. 111, as
amended by Presidential Decree No. 460 and Republic Act No. 7278; that in Boy Scouts of the Philippines v.
National Labor Relations Commission, the Supreme Court ruled that the BSP, as constituted under its charter,
was a "government-controlled corporation within the meaning of Article IX(B)(2)(1) of the Constitution"; and
that "the BSP is appropriately regarded as a government instrumentality under the 1987 Administrative Code."

The BSP sought reconsideration of the COA Resolution in a letter stating that Republic Act No. 7278 which
amended the BSP’s charter after the cited case was decided. The most salient of all amendments in RA No.
7278 is the alteration of the composition of the National Executive Board of the BSP. The said RA virtually
eliminated the "substantial government participation" in the National Executive Board by removing: (i) the
President of the Philippines and executive secretaries, with the exception of the Secretary of Education, as
members thereof; and (ii) the appointment and confirmation power of the President of the Philippines, as Chief
Scout, over the members of the said Board. The BSP believes that the cited case has been superseded by RA
7278. Thereby weakening the case’s conclusion that the BSP is a government-controlled corporation. The
1987 Administrative Code itself, of which the BSP vs. NLRC relied on for some terms, defines government-
owned and controlled corporations as agencies organized as stock or non-stock corporations which the BSP,
under its present charter, is not. Also, the Government, like in other GOCCs, does not have funds invested in
the BSP. What RA 7278 only provides is that the Government or any of its subdivisions, branches, offices,
agencies and instrumentalities can from time to time donate and contribute funds to the BSP. The BSP is not
an entity administering special funds. It is not even included in the DECS National Budget

BSP’s CONTENTIONS:
The BSP contends that Boy Scouts of the Philippines v. National Labor Relations Commission is inapplicable
for purposes of determining the audit jurisdiction of the COA as the issue therein was the jurisdiction of the
National Labor Relations Commission over a case for illegal dismissal and unfair labor practice filed by certain
BSP employees.

While the BSP concedes that its functions do relate to those that the government might otherwise completely
assume on its own, it avers that this alone was not determinative of the COA’s audit jurisdiction over it. The
BSP further avers that the Court in Boy Scouts of the Philippines v. National Labor Relations Commission
"simply stated x x x that in respect of functions, the BSP is akin to a public corporation" but this was not
synonymous to holding that the BSP is a government corporation or entity subject to audit by the COA.

The BSP contends that Republic Act No. 7278 introduced crucial amendments to its charter; hence, the
findings of the Court in Boy Scouts of the Philippines v. National Labor Relations Commission are no longer
valid as the government has ceased to play a controlling influence in it. The BSP claims that the
pronouncements of the Court therein must be taken only within the context of that case; that the Court had
categorically found that its assets were acquired from the Boy Scouts of America and not from the Philippine
government, and that its operations are financed chiefly from membership dues of the Boy Scouts themselves
as well as from property rentals; and that "the BSP may correctly be characterized as non-governmental, and
hence, beyond the audit jurisdiction of the COA." It further claims that the designation by the Court.

COA’s CONTENTIONS:
 1. The BSP is a public corporation created under Commonwealth Act No. 111 dated October 31, 1936,
and whose functions relate to the fostering of public virtues of citizenship and patriotism and the
general improvement of the moral spirit and fiber of the youth. The manner of creation and the purpose
for which the BSP was created indubitably prove that it is a government agency.

2. Being a government agency, the funds and property owned or held in trust by the BSP are subject to
the audit authority of respondent Commission on Audit pursuant to Section 2 (1), Article IX-D of the
1987 Constitution.

3. Republic Act No. 7278 did not change the character of the BSP as a government-owned or controlled
corporation and government instrumentality

V. STATEMENT OF THE CASE

In a letter dated November 20, 2000 signed by Director Amorsonia B. Escarda, the COA informed the BSP
that a preliminary survey of its organizational structure, operations and accounting system/records shall be
conducted on November 21 to 22, 2000.

Upon the BSP’s request, the audit was deferred for thirty (30) days. The BSP then filed a Petition for Review
with Prayer for Preliminary Injunction and/or Temporary Restraining Order before the COA. This was denied
by the COA in its questioned Decision, which held that the BSP is under its audit jurisdiction. The BSP moved
for reconsideration but this was likewise denied under its questioned Resolution.

This led to the filing by the BSP of this petition for prohibition with preliminary injunction and temporary
restraining order against the COA.

VI. ISSUE

1. Whether or not BSP is a public corporation

2. Whether or not COA has an authority to audit BSP

VII. RULING

1. BSP is a public corporation and its funds are subject to the COA’s audit jurisdiction.

The BSP, which is a corporation created for a public interest or purpose, is subject to the law creating it under
Article 45 of the Civil Code, which provides:

Art. 45. Juridical persons mentioned in Nos. 1 and 2 of the preceding article are governed by the laws creating
or recognizing them.

Private corporations are regulated by laws of general application on the subject.

Partnerships and associations for private interest or purpose are governed by the provisions of this Code
concerning partnerships. (Emphasis and underscoring supplied.)

The purpose of the BSP as stated in its amended charter shows that it was created in order to implement a
State policy declared in Article II, Section 13 of the Constitution, which reads:

ARTICLE II - DECLARATION OF PRINCIPLES AND STATE POLICIES

Section 13. The State recognizes the vital role of the youth in nation-building and shall promote and protect
their physical, moral, spiritual, intellectual, and social well-being. It shall inculcate in the youth patriotism and
nationalism, and encourage their involvement in public and civic affairs.
Evidently, the BSP, which was created by a special law to serve a public purpose in pursuit of a constitutional
mandate, comes within the class of "public corporations" defined by paragraph 2, Article 44 of the Civil Code
and governed by the law which creates it, pursuant to Article 45 of the same Code.

The BSP’s Classification Under the Administrative Code of 1987

The public, rather than private, character of the BSP is recognized by the fact that, along with the Girl Scouts
of the Philippines, it is classified as an attached agency of the DECS under Executive Order No. 292, or the
Administrative Code of 1987, which states:

TITLE VI – EDUCATION, CULTURE AND SPORTS

Chapter 8 – Attached Agencies

SEC. 20. Attached Agencies. – The following agencies are hereby attached to the Department:

xxxx

(12) Boy Scouts of the Philippines;

(13) Girl Scouts of the Philippines.

The administrative relationship of an attached agency to the department is defined in the Administrative Code
of 1987 as follows:

BOOK IV
THE EXECUTIVE BRANCH

Chapter 7 – ADMINISTRATIVE RELATIONSHIP

SEC. 38. Definition of Administrative Relationship. – Unless otherwise expressly stated in the Code or in
other laws defining the special relationships of particular agencies, administrative relationships shall be
categorized and defined as follows:

xxxx

(3) Attachment. – (a) This refers to the lateral relationship between the department or its equivalent and the
attached agency or corporation for purposes of policy and program coordination. The coordination may be
accomplished by having the department represented in the governing board of the attached agency or
corporation, either as chairman or as a member, with or without voting rights, if this is permitted by the charter;
having the attached corporation or agency comply with a system of periodic reporting which shall reflect the
progress of programs and projects; and having the department or its equivalent provide general policies
through its representative in the board, which shall serve as the framework for the internal policies of the
attached corporation or agency.

As an attached agency, the BSP enjoys operational autonomy, as long as policy and program coordination is
achieved by having at least one representative of government in its governing board, which in the case of the
BSP is the DECS Secretary. In this sense, the BSP is not under government control or "supervision and
control." Still this characteristic does not make the attached chartered agency a private corporation covered
by the constitutional proscription in question.

Assuming for the sake of argument that the BSP ceases to be owned or controlled by the government because
of reduction of the number of representatives of the government in the BSP Board, it does not follow that it
also ceases to be a government instrumentality as it still retains all the characteristics of the latter as an attached
agency of the DECS under the Administrative Code. Vesting corporate powers to an attached agency or
instrumentality of the government is not constitutionally prohibited and is allowed by the above-mentioned
provisions of the Civil Code and the 1987 Administrative Code.

As presently constituted, the BSP still remains an instrumentality of the national government. It is a public
corporation created by law for a public purpose, attached to the DECS pursuant to its Charter and the
Administrative Code of 1987. It is not a private corporation which is required to be owned or controlled by
the government and be economically viable to justify its existence under a special law.

Therefore, even though the amended BSP charter did away with most of the governmental presence in the
BSP Board, this was done to more strongly promote the BSP’s objectives, which were not supported under
Presidential Decree No. 460. The BSP objectives, as pointed out earlier, are consistent with the public purpose
of the promotion of the well-being of the youth, the future leaders of the country. The amendments were not
done with the view of changing the character of the BSP into a privatized corporation. The BSP remains an
agency attached to a department of the government, the DECS, and it was not at all stripped of its public
character.

The ownership and control test is likewise irrelevant for a public corporation like the BSP. To reiterate, the
relationship of the BSP, an attached agency, to the government, through the DECS, is defined in the Revised
Administrative Code of 1987. The BSP meets the minimum statutory requirement of an attached government
agency as the DECS Secretary sits at the BSP Board ex officio, thus facilitating the policy and program
coordination between the BSP and the DECS.

2. BSP is a public corporation and its funds are subject to the COA’s audit jurisdiction.

Regarding the COA’s jurisdiction over the BSP, Section 8 of its amended charter allows the BSP to receive
contributions or donations from the government. Section 8 reads:

Section 8. Any donation or contribution which from time to time may be made to the Boy Scouts of the
Philippines by the Government or any of its subdivisions, branches, offices, agencies or instrumentalities shall
be expended by the Executive Board in pursuance of this Act.

Since the BSP, under its amended charter, continues to be a public corporation or a government
instrumentality, we come to the inevitable conclusion that it is subject to the exercise by the COA of its audit
jurisdiction in the manner consistent with the provisions of the BSP Charter.

VIII. DISPOSITIVE PORTION

WHEREFORE, premises considered, the instant petition for prohibition is DISMISSED.

 I. SHORT TITLE: CARANDANG VS DESIERTO

II. FULL TITLE: ANTONIO M. CARANDANG, Petitioner, vs. HONORABLE ANIANO A.

DESIERTO, OFFICE OF THE OMBUDSMAN, Respondent, G.R. No. 148076, January 12, 2011,
J. BERSAMIN

III. TOPIC: Non-chartered GOCC

IV. STATEMENT OF THE FACTS

Roberto S. Benedicto (Benedicto) was a stockholder of Radio Philippines Network Inc., (RPN), a private
corporation duly registered with the Securities and Exchange Commission (SEC). In March 1986, the
Government ordered the sequestration of RPN’s properties, assets, and business. On November 3, 1990, the
Presidential Commission on Good Government (PCGG) entered into a compromise agreement with
Benedicto, whereby he ceded to the Government, through the PCGG, all his shares of stock in RPN.
Consequently, upon motion of the PCGG, the Sandiganbayan (Second Division) directed the president and
corporate secretary of RPN to transfer to the PCGG Benedicto’s shares representing 72.4% of the total issued
and outstanding capital stock of RPN.

However, Benedicto moved for a reconsideration, contending that his RPN shares ceded to the Government,
through the PCGG, represented only 32.4% of RPN’s outstanding capital stock, not 72.4%. Benedicto’s
motion for reconsideration has remained unresolved to this date

On July 28, 1998, Carandang assumed office as general manager and chief operating officer of RPN.

On April 19, 1999, Carandang and other RPN officials were charged with grave misconduct before the
Ombudsman. The charge alleged that Carandang, in his capacity as the general manager of RPN, had entered
into a contract with AF Broadcasting Incorporated despite his being an incorporator, director, and stockholder
of that corporation; that he had thus held financial and material interest in a contract that had required the
approval of his office; and that the transaction was prohibited under Section 7 (a) and Section 9 of Republic
Act No. 6713 (Code of Conduct and Ethical Standards for Public Officials and Employees), thereby rendering
him administratively liable for grave misconduct.

Carandang sought the dismissal of the administrative charge on the ground that the Ombudsman had no
jurisdiction over him because RPN was not a government-owned or -controlled corporation.

On May 7, 1999, the Ombudsman suspended Carandang from his positions in RPN.

On September 8, 1999, Carandang manifested that he was no longer interested and had no further claim to his
positions in RPN. He was subsequently replaced by Edgar San Luis.

V. STATEMENT OF THE CASE

In its decision dated January 26, 2000, the Ombudsman found Carandang guilty of grave misconduct and
ordered his dismissal from the service.

Carandang moved for reconsideration on two grounds: (a) that the Ombudsman had no jurisdiction over him
because RPN was not a government-owned or -controlled corporation; and (b) that he had no financial and
material interest in the contract that required the approval of his office.

The Ombudsman denied Carandang’s motion for reconsideration on March 15, 2000.
On appeal, the CA affirmed the decision of the Ombudsman

VI. ISSUE
 1. Whether or not RPN is a GOCC
2. Whether or not Ombudsman has jurisdiction over the person of Carandang as he was a public official
considering that RPN is a GOCC

VII. RULING

1. RPN was neither a government-owned nor a controlled corporation because of the Government’s total
share in RPN’s capital stock being only 32.4%.

A corporation is considered a government-owned or -controlled corporation only when the Government

directly or indirectly owns or controls at least a majority or 51% share of the capital stock. The definition
mentions three (3) requisites, namely, first, any agency organized as a stock or non-stock corporation; second,
vested with functions relating to public needs whether governmental or proprietary in nature; and, third, owned
by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case
of stock corporations, to the extent of at least fifty-one (51) of its capital stock.

Although it is true that the Sandiganbayan (Second Division) ordered the transfer to the PCGG of Benedicto’s
shares that represented 72.4% of the total issued and outstanding capital stock of RPN, such quantification of
Benedicto’s shareholding cannot be controlling in view of Benedicto’s timely filing of a motion for
reconsideration whereby he clarified and insisted that the shares ceded to the PCGG had accounted for only
32.4%, not 72.4%, of RPN’s outstanding capital stock. With the extent of Benedicto’s holdings in RPN
remaining unresolved with finality, concluding that the Government held the majority of RPN’s capital stock
as to make RPN a government-owned or -controlled corporation would be bereft of any factual and legal basis.

Even the PCGG and the Office of the President (OP) have recognized RPN’s status as being neither a
government-owned nor -controlled corporation.

It appears that under the RP-Benedicto Compromise Agreement dated November 3, 1990 – validity of which
has been sustained by the Supreme Court in G.R. No. 96087, March 31, 1992, (Guingona, Jr. vs. PCGG, 207
SCRA 659) – Benedicto ceded all his rights, interest and/or participation, if he has any, in RPN-9, among
others, to the government which rights, interest and/or participation per PCGG’s understanding, include
9,494,327.50 shares of stock, i.e, about 72.4% of the total issued and outstanding capital stock of RPN-9.

Accordingly, the Sandiganbayan (Second Division), on motion of the government through PCGG, ordered the
president and corporate secretary of the RPN-9 to "effect the immediate cancellation and transfer of the
9,494,327.50 shares corresponding to Benedicto’s proprietary interest in RPN-9 to the Republic of the
Philippines c/o PCGG" (Sandiganbayan’s Resolution of February 3, 1998 in Civil Case No. 0034, RP vs.
Roberto Benedicto, et. al.) Benedicto, however, filed a motion for reconsideration of said Resolution,
contending that the number of RPN-9 shares ceded by him embraces only his personal holdings and those of
his immediate family and nominees totaling 4,161,207.5 shares but excluding the RPN-9 shares in the name
of Far East Managers and Investors, Inc. ("FEMIE"), which is about 40%, as they are corporate
properties/assets of FEMIE and not his personal holdings. Said motion for reconsideration is still pending
resolution by the Sandiganbayan.

RPN-9 is not a government owned or controlled corporation within the contemplation of the Administrative
Code of 1987, for admittedly, RPN-9 was organized for private needs and profits, and not for public needs
and was not specifically vested with functions relating to public needs.

Neither could RPN-9 be considered a "government-owned or controlled corporation" under Presidential

Decree (PD) No. 2029 dated February 4, 1986, which defines said terms as follows:

"Sec.2. Definition. – A government owned- or controlled corporation is a stock or non-stock corporation,

whether performing governmental or proprietary functions which is directly chartered by special law or
organized under the general corporation law is owned or controlled by the government directly, or indirectly
through a parent corporation or subsidiary corporation, to the extent of at least a majority of its outstanding
capital stock or of its outstanding voting capital stock;

Provided, that a corporation organized under the general corporation law under private ownership at least a
majority of the shares of stock of which were conveyed to a government corporation in satisfaction of debts
incurred with a government financial institution, whether by foreclosure or otherwise, or a subsidiary
corporation of a government corporation organized exclusively to own and manage, or lease, or operate
specific physical assets acquired by a government financial institution in satisfaction of debts incurred
therewith, and which in any case by enunciated policy of the government is required to be disposed of to
private ownership within a specified period of time, shall not be considered a government-owned or controlled
corporation before such disposition and even if the ownership or control thereof is subsequently transferred
to another government-owned or controlled corporation."

A government-owned or controlled corporation is either "parent" corporation, i.e., one "created by special
law" (Sec. 3 (a), PD 2029) or a "subsidiary" corporation, i.e, one created pursuant to law where at least a
majority of the outstanding voting capital stock of which is owned by parent government corporation and/or
other government-owned subsidiaries. (Sec. 3 (b), PD 2029).

2. Ombudsman does not have the jurisdiction over the person of Carandang.

The RPN officials, are outside the jurisdiction of this Office (Office of the Ombudsman); they are employed
by a private corporation registered with the Securities and Exchange Commission, the RPN, which is not a
government owned or controlled corporation

In fine, Carandang was correct in insisting that being a private individual he was not subject to the
administrative authority of the Ombudsman and to the criminal jurisdiction of the Sandiganbayan.

VIII. DISPOSITIVE PORTION

WHEREFORE, we grant the petitions in G.R. No. 148076 and G.R. No. 153161.

We reverse and set aside the decision promulgated on February 12, 2001 by the Court of Appeals in C.A.-
G.R. SP No. 58204, and dismiss the administrative charge for grave misconduct against the petitioner.

We annul and set aside the resolutions dated October 17, 2001 and March 14, 2002, as well as the order dated
March 15, 2002, all issued by the Sandiganbayan (Fifth Division) in Criminal Case No. 25802, and dismiss
Criminal Case No. 25802 as against the petitioner.
 I. SHORT TITLE: FUNA vs MECO and COA

II. FULL TITLE: DENNIS A.B. FUNA, Petitioner, vs. MANILA ECONOMIC AND
CULTURAL OFFICE and the COMMISSION ON AUDIT, Respondents. G.R. No. 193462,
February 4, 2014, J. Perez.

III. TOPIC: Non-chartered GOCC

IV. STATEMENT OF THE FACTS

On 23 August 2010, petitioner Funa sent a letter to the COA requesting for a "copy of the latest financial and
audit report" of the MECO invoking, for that purpose, his "constitutional right to information on matters of
public concern." The petitioner made the request on the belief that the MECO, being under the "operational
supervision" of the Department of Trade and Industry (DTI), is a government owned and controlled
corporation (GOCC) and thus subject to the audit jurisdiction of the COA.

On 25 August 2010, Assistant Commissioner Naranjo issued a memorandum20 referring the petitioner’s
request to COA Assistant Commissioner Emma M. Espina for "further disposition." In this memorandum,
however, Assistant Commissioner Naranjo revealed that the MECO was "not among the agencies audited by
any of the three Clusters of the Corporate Government Sector."

V. STATEMENT OF THE CASE

Taking the 25 August 2010 memorandum as an admission that the COA had never audited and examined the
accounts of the MECO, the petitioner filed the instant petition for mandamus on 8 September 2010. Petitioner
filed the suit in his capacities as "taxpayer, concerned citizen, a member of the Philippine Bar and law book
author." He impleaded both the COA and the MECO.

PETITIONER FUNA’s CONTENTION:

Petitioner posits that by failing to audit the accounts of the MECO, the COA is neglecting its duty under
Section 2(1), Article IX-D of the Constitution to audit the accounts of an otherwise bona fide GOCC or
government instrumentality. It is the adamant claim of the petitioner that the MECO is a GOCC without an
original charter or, at least, a government instrumentality, the funds of which partake the nature of public
funds.

MECO’s CONTENTIONS:
1. It is not owned or controlled by the government. Contrary to the allegations of the petitioner, the President
of the Philippines does not appoint its board of directors.39 The "desire letter" that the President transmits is
merely recommendatory and not binding on the corporation. As a corporation organized under the Corporation
Code, matters relating to the election of its directors and officers, as well as its membership, are governed by
the appropriate provisions of the said code, its articles of incorporation and its by-laws. Thus, it is the directors
who elect the corporation’s officers; the members who elect the directors; and the directors who admit the
members by way of a unanimous resolution. All of its officers, directors, and members are private individuals
and are not government officials.

2. The government merely has policy supervision over it. Policy supervision is a lesser form of supervision
wherein the government’s oversight is limited only to ensuring that the corporation’s activities are in tune
with the country’s commitments under the One China policy of the PROC. The day-to-day operations of the
corporation, however, remain to be controlled by its duly elected board of directors.

COA’s CONTENTIONS:
In conceding that it has audit jurisdiction over the accounts of the MECO, however, the COA clarifies that it
does not consider the former as a GOCC or a government instrumentality. On the contrary, the COA maintains
that the MECO is a non-governmental entity.
The COA argues that, despite being a non-governmental entity, the MECO may still be audited with respect
to the "verification fees" for overseas employment documents that it collects from Taiwanese employers on
behalf of the DOLE. The COA claims that, under Joint Circular No. 3-99, the MECO is mandated to remit to
the Department of Labor and Employment (DOLE) a portion of such "verification fees." The COA, therefore,
classifies the MECO as a non-governmental entity "required to pay xxx government share" subject to a partial
audit of its accounts under Section 26 of the Presidential Decree No. 1445 or the State Audit Code of the
Philippines (Audit Code).

VI. ISSUE

1. Whether or not MECO is a GOCC

2. Whether or not COA has jurisdiction to audit the accounts of MECO

VII. RULING

1. The MECO is not a GOCC or government instrumentality. It is a sui generis private entity especially
entrusted by the government with the facilitation of unofficial relations with the people in Taiwan
without jeopardizing the country’s faithful commitment to the One China policy of the PROC.

GOCCs, therefore, are "stock or non-stock" corporations "vested with functions relating to public needs" that
are "owned by the Government directly or through its instrumentalities." By definition, three attributes thus
make an entity a GOCC: first, its organization as stock or non-stock corporation4 second, the public character
of its function; and third, government ownership over the same.

Possession of all three attributes is necessary to deem an entity a GOCC.

In this case, there is not much dispute that the MECO possesses the first and second attributes. It is the third
attribute, which the MECO lacks.

The MECO Is Organized as a Non-Stock Corporation

The organization of the MECO as a non-stock corporation cannot at all be denied. Records disclose that the
MECO was incorporated as a non-stock corporation under the Corporation Code on 16 December 1977.95
The incorporators of the MECO were Simeon R. Roxas, Florencio C. Guzon, Manuel K. Dayrit, Pio K. Luz
and Eduardo B. Ledesma, who also served as the corporation’s original members and directors.

The purposes for which the MECO was organized also establishes its non-profit character, to wit:

1. To establish and develop the commercial and industrial interests of Filipino nationals here and abroad and
assist on all measures designed to promote and maintain the trade relations of the country with the citizens of
other foreign countries;

2. To receive and accept grants and subsidies that are reasonably necessary in carrying out the corporate
purposes provided they are not subject to conditions defeatist for or incompatible with said purpose;

3. To acquire by purchase, lease or by any gratuitous title real and personal properties as may be necessary for
the use and need of the corporation, and in like manner when they are

4. To do and perform any and all acts which are deemed reasonably necessary to carry out the purposes.

The purposes for which the MECO was organized are somewhat analogous to those of a trade, business or
industry chamber, but only on a much larger scale i.e., instead of furthering the interests of a particular line of
business or industry within a local sphere, the MECO seeks to promote the general interests of the Filipino
people in a foreign land.
Finally, it is not disputed that none of the income derived by the MECO is distributable as dividends to any of
its members, directors or officers.

Verily, the MECO is organized as a non-stock corporation.

The MECO Is Not Owned or Controlled by the Government Organization as a non-stock corporation and the
mere performance of functions with a public aspect, however, are not by themselves sufficient to consider the
MECO as a GOCC. In order to qualify as a GOCC, a corporation must also, if not more importantly, be owned
by the government.

The government owns a stock or non-stock corporation if it has controlling interest in the corporation. In a
stock corporation, the controlling interest of the government is assured by its ownership of at least fifty-one
percent (51%) of the corporate capital stock. In a non-stock corporation, like the MECO, jurisprudence teaches
that the controlling interest of the government is affirmed when "at least majority of the members are
government officials holding such membership by appointment or designation" or there is otherwise
"substantial participation of the government in the selection" of the corporation’s governing board.

In this case, the petitioner argues that the government has controlling interest in the MECO because it is the
President of the Philippines that indirectly appoints the directors of the corporation. The petitioner claims that
the President appoints directors of the MECO thru "desire letters" addressed to the corporation’s board. As
evidence, the petitioner cites the assumption of one Mr. Antonio Basilio as chairman of the board of directors
of the MECO in 2001, which was allegedly accomplished when former President Macapagal-Arroyo, through
a memorandum dated 20 February 2001, expressed her "desire" to the board of directors of the MECO for the
election of Mr. Basilio as chairman.

The MECO, however, counters that the "desire letters" that the President transmits are merely
recommendatory and not binding on it. The MECO maintains that, as a corporation organized under the
Corporation Code, matters relating to the election of its directors and officers, as well as its membership, are
ultimately governed by the appropriate provisions of the said code, its articles of incorporation and its by-
laws.

The fact of the incorporation of the MECO under the Corporation Code is key. The MECO was correct in
postulating that, as a corporation organized under the Corporation Code, it is governed by the appropriate
provisions of the said code, its articles of incorporation and its by-laws. In this case, it is the by-laws109 of
the MECO that stipulates that its directors are elected by its members; its officers are elected by its directors;
and its members, other than the original incorporators, are admitted by way of a unanimous board resolution.

2. The Accounts of the MECO Pertaining to the Verification Fees and Consular Fees May Be Audited
by the COA.

First. The MECO receives the "verification fees" by reason of being the collection agent of the DOLE—a
government agency. Out of its collections, the MECO is required, by agreement, to remit a portion thereof to
the DOLE. Hence, the MECO is accountable to the government for its collections of such "verification fees"
and, for that purpose, may be audited by the COA.

Second. Like the "verification fees," the "consular fees" are also received by the MECO through the
government, having been derived from the exercise of consular functions entrusted to the MECO by the
government. Hence, the MECO remains accountable to the government for its collections of "consular fees"
and, for that purpose, may be audited by the COA.

In sum, the MECO is not a GOCC or government instrumentality. It is a sui generis private entity especially
entrusted by the government with the facilitation of unofficial relations with the people in Taiwan without
jeopardizing the country’s faithful commitment to the One China policy of the PROC. However, despite its
non-governmental character, the MECO handles government funds in the form of the "verification fees" it
collects on behalf of the DOLE and the "consular fees" it collects under Section 2(6) of EO No. 15, s. 2001.
Hence, under existing laws, the accounts of the MECO pertaining to its collection of such "verification fees"
and "consular fees" should be audited by the COA.

VIII. DISPOSITIVE PORTION

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Manila Economic and
Cultural Office is hereby declared a non-governmental entity. However, the accounts of the Manila Economic
and Cultural Office pertaining to: the verification fees contemplated by Section 7 of Executive Order No. 1022
issued 1 May 1985, that the former collects on behalf of the Department of Labor and Employment, and the
fees it was authorized to collect under Section 2(6) of Executive Order No. 15 issued 16 May 2001, are subject
to the audit jurisdiction of the COA.